When it comes to luxury goods, Japan’s consumers are among the world’s biggest spenders. The country’s luxury market, worth $15 billion to $20 billion, is second in size only to that of the United States. Yet the “mass luxury”1 market is feeling unprecedented pressure. Sales are down sharply, luxury-goods companies have warned that they won’t meet their current growth and earnings targets, and dire headlines proclaim the market’s decline.
These challenges are hardly unique to Japan—the economic crisis has sapped consumer confidence globally and sparked a backlash against conspicuous consumption. Yet Japan is different: the current crisis has not only reduced the discretionary spending of consumers but also accelerated fundamental shifts in their attitudes and behavior. These changes are not temporary, and luxury players must adjust their strategies to succeed in a market that, despite the current slowdown, will remain very large and attractive.
To help luxury companies better understand both the near- and longer-term outlook for Japan’s market, McKinsey surveyed more than 1,500 Japanese luxury consumers in March and April 2009.2 We also interviewed CEOs, presidents, and other senior officers at more than 20 luxury-goods and premium-brand companies, as well as the CEOs of three of Japan’s largest department store chains and a number of luxury hotels.